Dear CJ family, 2024, The Year of the Dragon, is upon us.
I wish you and your family another year of good health and happiness.
I would also like to sincerely thank you for doing your best in your respective positions around the world for CJ Group’s growth despite last year’s challenging business environment.
In 2023, the high interest rates began to impact the global economy. The services industry slowed down, and the manufacturing sector stagnated. Korea saw a decline in semiconductor and other exports. Even domestic demand was sluggish due to high household debt.
Accordingly, the performance of listed domestic companies declined sharply. CJ Group also had significant trouble meeting planned performance targets. While there was growth in some affiliates, at the Group level, we are facing a crisis of stalled growth and weakened profitability and competitiveness brought on by a lack of preparedness.
Here is the 2023 recap for each business division.
Amid global inflation and decline in consumer spending, CJ CheilJedang’s food business saw growth in global strategic products (GSPs) and frozen pizzas. The food operations laid the foundation for becoming a global top player and K-food’s accelerated growth through business expansion in Southeast Asia and Europe. However, efforts at structural improvement in Japan and China were hampered by inadequate response to changes in the business environment.
CJ BIO and CJ Food & Nutrition Tech (FNT) businesses improved the profitability of tryptophan and amino acids by leveraging R&D and tech capabilities and kicked off the clinical trial for a new microbiome-based drug. However, the proactive response to global market changes and intensifying competition was not sufficient, which led to weakened revenue growth and profit competitiveness. White BIO suffered from insufficient future planning. The delayed commercialization of PHA serves as a case in point.
Regarding the entertainment business, despite the slowdown of the advertising market due to the economic downturn, stronger music human IP performance and expansion of overseas content sales boosted the structural competitiveness of the business. However, due to TVING’s sluggish growth and Fifth Season’s lackluster performance, the entertainment business failed to secure momentum for future growth.
CJ Logistics made meaningful strides in revenue growth and profit performance through O-NE, W&D, and other domestic operational innovations. The company also laid the groundwork for growth through futuristic innovation by steadfastly securing core competencies such as TES, infrastructure, and top talent and by strengthening strategic partnerships at home and abroad. However, the performance of CJ Logistics’ global operations fell short due to insufficient proactive response to global volatility, a contracting forwarding market, and other changes in market competition and conditions.
CJ OLIVE YOUNG did not rest on its laurels in 2023. The company maintained its domestic market leadership by reinforcing online-offline synergy and by pursuing health, premium, and other category-specific expansion.
CJ OLIVE YOUNG also laid the foundation for online-centered global operations and continued to take on new challenges for mid to long-term growth through futuristic innovation.However, the company left a bit to be desired as an industry leader in terms of building an industry ecosystem for mutual growth and pursuing win-win programs for domestic and international customers. Despite the slowdown of the domestic home shopping market, e-commerce operations restored enterprise profitability through a one-platform strategy while laying the foundation for future growth by creating an MLC (mobile live commerce) growth strategy and launching a new fashion vertical platform. The brand business, however, fell short in terms of early business structure stabilization.
CJ CGV raised capital to improve its financial position, which had deteriorated during the pandemic. CJ CGV also laid the groundwork for renewed growth. The multiplex franchise offered 4DX, Screen X, and other differentiated moviegoing experiences, increased unique content, and developed and implemented the Next CGV strategy for optimal space utilization. However, profitability was somewhat lackluster due to the decline in blockbuster hits resulting from the domestic and global market slowdown and the continued before-tax deficit caused by delayed business structure improvements.
Despite the continued downturn of the food service market, CJ Freshway solidified its business structure that turns an operating profit of KRW 100 billion (USD 77 million) on the back of a stable restaurant and catering portfolio. However, there was some disappointment in CJ Freshway’s efforts at securing differentiated competitiveness for future growth through the meal solution and digital platform businesses.
In a challenging environment of sustained high inflation, CJ Foodville has set up a self-sustaining structure by turning the restaurant business around. CJ Foodville is pushing to accelerate future growth by securing a high-profit structure and hastening the rollout of new global Tous les Jours locations, including the 100th US store. However, there were some setbacks in accomplishing the goal caused by the falling profitability of the domestic bakery business.
Members of the CJ family, there will be cause for both optimism and pessimism this year and structural changes continue to accelerate.
Having recovered from the protracted downturn brought on by the 2008 financial crisis, the US economy is poised to continue its growth through reshoring, full employment, and the AI revolution. India, Indonesia, Mexico, and other beneficiaries of US’ growth are also expected to continue their economic expansion.
China, in contrast, is unlikely to recover the breakneck pace of growth it enjoyed over the past 30 years despite various government policies because population growth and real estate market expansion have peaked.
Although Europe avoided a recession, it must cope with risk factors that threaten its competitiveness, such as the war-induced energy crisis and the belated adoption of electric vehicles. While the risk of a full-on global recession has lessened, global geopolitical uncertainties will persist in 2024. The Ukraine-Russia war and Israel-Hamas conflict will continue, and the outcome of the US presidential election at the end of the year is anyone’s guess.
The Korean economy will continue to struggle. While semi-conductor chip and other exports are projected to recover gradually, high interest rates are expected to keep domestic spending down.
Meanwhile, CJ Group is facing an unprecedented crisis separate from these external business conditions. As a fast-growing icon of innovation, the crises we faced during the past 30 years were temporary ones with external causes. The current crisis, however, is more serious, brought on by internal factors such as complacency and arrogance.
Our business model has been challenged by Netflix, Coupang, and other new innovative competitors. Latecomers are also quickly catching up to us. We have failed to respond effectively.
While we have been complacent, the ONLYONE spirit, our core value, has faded.
CJ Group’s ONLYONE spirit is our commitment to always aiming to be — and actually becoming — the first, best, or different in everything we do. It demands that we are not only No.1 but also the unrivaled No. 1 with outstanding competencies as well as the global No. 1.
All CJ members must reclaim the urgency to be No. 1, the urgency to be the best, and the urgency to get the job done no matter what.
All CJ members, in 2024, we must focus all our efforts on restoring the ONLYONE spirit, CJ Group’s core value. And to that end, here are the key tasks for the new year that we must undertake.
First, we must thoroughly meet the 2024 goals with renewed ONLYONE spirit.
This year, we will aim to maximize profit and improve the financial structure for CJ Group’s value enhancement. First, for businesses for which we have already secured outstanding competencies, we will aggressively seek global growth.
Second, we will formulate a new and ambitious 24-26 medium-term plan based on our ONLYONE spirit for CJ Group’s quantum leap. The 24-26 medium-term plan must not be just about quantitative goals. It must be founded on clear qualitative goals based on strong employee buy-in and consensus. It must also identify critical outstanding competencies, global goals, and specific action plans for each business arm.
The global spread of K-food and K-culture is a good opportunity for CJ Group. We must not miss out on this golden opportunity.
The 24-26 medium-term plan will determine whether CJ Group will grow into the best global lifestyle company or see our growth come to an end.
To thoroughly execute the year’s two key tasks as mentioned above, we must fundamentally innovate our organizational culture.
First, we must cultivate and effectively place top talent. Leaders must secure top talent and develop internal talent with a long-term plan and carefully place them in the right place at the right time.
Second, we must promote a culture of accountability. We must be bold in delegating authority to the people poised to drive success in achieving agreed goals. We must build an organizational culture whereby those who achieve exceptional performance with a sense of responsibility and strong will are rewarded while those who fail to do so are held accountable.
Lastly, we must create an environment where capable, diligent, and driven top talent
can reach goals and constantly take on new challenges with a passion for their work.
If leaders provide a clear vision and goal and offer diverse opportunities, members will internalize the vision and commit themselves to delivering ONLYONE results by performing at their full potential.
Members of the CJ family, for CJ Group to become a true global lifestyle company, we must restore the ONLYONE spirit and become the unrivaled, and outstanding No. 1. When a goal is reached, we must remain humble and always go back to basics by setting a new ambitious goal. For 70 years, CJ Group has continued to challenge ourselves to make the seemingly impossible possible.
We have evolved from a manufacturer of sugar, flour, and other materials
to a company spreading K-food and K-culture around the world. If we work as one to overcome the crisis at hand, I am certain that CJ Group will evolve into a leading global lifestyle company.
I ask that this year, as always, you do your best for CJ Group’s continued growth. All CJ members around the globe, I hope all your wishes for the year come true and that you and your family are blessed with good health and happiness.
I wish you a very happy New Year.
Thank you.
